Asymmetric Information versus Banks’ Costumer Trust, Albania Case Linked With SEE Countries

Abstract

This article examines the impact of information asymmetry on the level of trust customers have towards their banks in Albania. Specifically, the article analyses the implementation of transparency and information symmetry related to pricing and publishing banking interest rates, commissions and fees, clarity of banking products, and reports. The minimal obligation of Albanian banks is to obey the legal and regulatory requirements regarding transparency and information symmetry. However, banks in Albania - for pricing, commissions and fees of their typical services - follow their competition which is a relatively low level of transparency. Comparison of products’ terms and conditions among banks is difficult for the public as a result of the information asymmetry. In addition, some banks are in breach of regulation on transparency for banking and financial products and services. As importantly, expensive bank money transfer commissions increase customer tendency to avoid paying through the banking system, which in turn increase informality and potential forms of tax evasion. These findings are compared with data on other banks in South East Europe to identify the mechanism(s) that affect costumer trust. The article presents several conclusions and implications for Central Banks in Albania and the region to prevent potential costumer distrust by requiring banks to establish a common methodology for pricing and publication of symmetric information for products’ terms and conditions, which will be a good practice for the banking markets in Albania and the region.